10.26.2010

Ford Motor Co.'s third-quarter net income rose 68 percent as it grabbed a bigger share of the U.S. auto market and buyers paid more for its highly-rated cars and trucks.

It was Ford's sixth straight quarterly profit and the company's best third-quarter performance since at least 1990.

Ford CEO Alan Mulally said popular new cars, such as the Ford Fiesta subcompact and Ford Edge wagon, and aggressive cost-cutting helped the company make money despite lower global sales.

The automaker said it expects to end the year with as much cash as it has debt, a year earlier than it had previously forecast.

Ford, which four years ago mortgaged its factories, blue oval logo and other assets to fund a huge restructuring, said it paid off $2 billion in debt in the third quarter and expects to pay off an additional $3.6 billion for retiree health care on Friday. Ford's debt will stand at $22.8 billion after those two actions. It has $20.3 billion in cash.

When Ford pays its debt to the United Auto Workers health care trust, it will no longer owe the trust any money. The UAW agreed to the trust in 2007, and it began paying health care benefits for 195,000 retirees and spouses in January. The automaker was paying a 9 percent annual interest rate on its obligation to the trust.

Ford also said it is launching an offer to convert $3.5 billion in debt to common stock. The offer closes Nov. 23.

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Ford said it paid off $2 billion in debt in September and that it planned to pay its remaining obligation to the United Automobile Workers union’s retiree health care trust — $3.6 billion — on Friday, in cash. Ford had not been required to satisfy its debt to the union trust until 2022.

In all, the company expects to save about $800 million a year in interest as a result of the debt-reduction actions it has competed or announced this year, including a securities conversion offer that it is starting Tuesday. Company shares were slightly higher, about 0.3 percent, on Tuesday, held back analysts said about concerns of the share sale.

Ford had $26.4 billion in debt at the end of the quarter, down from $33.6 billion at the end of 2009. Its net debt stood at $2.6 billion, compared to $8.7 billion in December.

The chief financial officer, Lewis W. K. Booth, said debt reduction would continue to be a priority because a return to an investment-grade credit rating would allow Ford to reduce its borrowing costs.

“We’re working really hard on improving the balance sheet,” Mr. Booth said. Automotive operating-related cash flow was $900 million positive in the quarter. Ford has projected continued positive cash flow and solid profit for the rest of 2010 and in 2011.

Three months ago, Ford said it would eliminate its net debt by the end of 2011. Its high debt load has been a concern to many analysts. The last time Ford had more cash than debt was in mid-2008, before the recession began and auto sales collapsed.